Highlights

KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Mon, 10 May 2021, 9:31 AM

 

Inari Amertron: Outperform Maintained With a Raised TP of RM3.80

Author:   |    Publish date:


Following Inari Amertron’s (INARI) strong quarter result recorded recently, Macquarie Equities Research (MQ Research) has a positive view on the group with its CY21 earnings outlook remains bullish. MQ Research maintains Outperform on INARI while raising the target price by 8.0% to RM3.80, which is 18.0% above from last Friday’s closing price of RM3.22.

High-certainty CY21E earnings outlook to prop up short-term valuations

  • INARI CY21 earnings outlook remains bullish, driven by 1) rebounding smartphone volumes from 2020’s COVID-depressed levels, 2) increased market share of a major smartphone end-customer, 3) rising 5G penetration, 4) modest radio frequency (RF)-content growth, and 5) supply chain inventory build. 1H FY21 delivered RF revenue growth of 66% year-on-year (YoY), and MQ Research forecasts +67% YoY RF revenue growth for FY21. Despite reported production trim, Apple is still guiding +11.6% YoY volumes. MQ Research expects elevated 3Q FY21 loadings due to a late 2020 product cycle. Management is also guiding for earlier ramp-up for the 2021 product cycle to avoid bottlenecks; MQ Research estimates loadings +25% YoY for 4Q FY21. As well, Opto segment revenue looks set for a +30% YoY rebound for 2H FY21. MQ Research believes CY21 earnings outlook remains high certainty and quality and sets a solid floor under INARI’s valuations. However, MQ Research also believes the volume-driven outlook is largely reflected in consensus expectations.

But R&D crystallisation to revenue would be a paradigm shift

  • INARI has been investing into research & development (R&D) for electromagnetic interference (EMI) sealing equipment, which is critical to reduce noise “cross-talk” in miniaturised 5G RF front end (FE) components. MQ Research estimates EMI sealing will add 7-10% to total back-end value-add. If successfully qualified by customers, MQ Research estimates INARI may be able to capture >80% share of the EMI sealing process (vs ~35% share for RF assembly). INARI has also been developing an alternative solution to copper pillar bumping that would allow it to undertake wafer bumping. Combined, MQ Research estimates fully scaled-up deployment of said technology could add roughly +10–20% incremental revenue to the RF segment long term and, more importantly, help to justify the high valuations seen by the stock of INARI, which is perceived as a higher-IP company. Management is guiding to RM20m/RM25m R&D spend for FY20/FY21. MQ Research’s bull-case fair value is RM4.70, factoring in 15% revenue upside and R&D add-back.

Earnings and Target Price Revision

  • MQ Research is raising FY21E/FY22E adjusted NP 17%/13% to reflect stronger volume loadings for the RF and Opto segments. MQ Research is also raising its target price to RM3.80 (from RM3.52) on unchanged 34x CY22E price-to-earnings ratio (PER).

Price Catalyst

  • 12-month price target: RM3.80 based on a PER methodology.
  • Catalyst: 3Q FY21 results, qualification of EMI equipment.

Action and Recommendation

  • Maintain Outperform. INRI remains a high-quality OSAT in the semiconductor space with sustainable earnings – which fits into MQ Research’s long tech portfolio.

12-month Target Price Methodology

  • INARI MK: RM3.80 based on a PER ratio methodology

Source: Macquarie Research - 15 Mar 2021

Share this
Labels: INARI

Related Stocks

Chart Stock Name Last Change Volume 
INARI 3.09 +0.06 (1.98%) 1,806,400 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

402  210  566  1336 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 FOCUS 0.0650.00 
 GOCEAN 0.0450.00 
 MTOUCHE 0.295+0.015 
 TANCO-WB 0.055+0.005 
 PERMAJU 0.1450.00 
 TANCO 0.14+0.005 
 BJCORP-WB 0.045-0.005 
 TAWIN-OR 0.070.00 
 ADVENTA 2.190.00 
 UCREST 0.30+0.005 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. OCK - The Unfaltering Tower OCK - The 5G Battle
2. FCPO FOR MAY 2021 NOW IS RM4,880 (TIME WHEN ALL GOES DOWN PALM OIL UP: SO BUY PALM OIL SHARES ON SALE, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
3. Can this penny stock double in value this year? Swim With Sharks
4. 马银行大会圆满落幕/万年船 小股东大权利
5. TWO POWERFUL FACTORS WHY PALM OIL BULL RUN CAN LAST MUCH LONGER THIS ROUND, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
6. 这家小型股的股价在今年还可以再翻倍吗? Swim With Sharks
7. The Competitive Edge of NEXGRAM (0096) in Vaccine Passports and Digital Facilitation Services: THE NEW GEM IN HEALTHCARE Nexgram (0096) - THE NEW GEM IN HEALTHCARE
8. [转贴] [Video:浅谈CAREPLUS GROUP BHD, CAREPLS, 0163] - James的股票投资James Share Investing James的股票投资James Share Investing
PARTNERS & BROKERS